International - Written by on Monday, September 7, 2015 10:29 - 0 Comments

OPINION: SFO Speech in full from the Cambridge Symposium – David Green lays out (again) why the SFO should remain. You can work out the rest…

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Opinion

Today saw the opening of the Cambridge Symposium where top prosecutors from all over the world converge on Cambridge at this annual gathering.  David Green, the Director of the SFO, took the opportunity to underscore, again, the importance of the SFO.

We agree.  But the fact he did so, tells you all you need to know.  There battle for the SFO may be in abeyance, but it definitely hasn’t gone away.  This is a shame because a Whitehall turf war (whether in abeyance or not) doesn’t do much to tackle Serious Fraud.

The speech

This is my 4th report to the Symposium as Director of the Serious Fraud Office.

I will use it to give you a brief overview of our work and the SFO’s “take” on current live issues affecting the SFO.

Results

The SFO is rightly judged by its results and the deterrent effect of its work. The last 12 months have seen significant results.

These include:-

The conviction of Magnus Petersen in the Weavering Capital hedge fund fraud, for which he received a sentence of 13years.

The first convictions under the Bribery Act in the Sustainable AgroEnergy trial, concerning a scheme in Cambodia.

And the first conviction, after a contested trial, of a corporate for foreign bribery in Smith and Ouzman which concerned that company’s security printing business in Africa.

On the Libor investigation, in October we saw the very significant plea of guilty by a senior banker in a British bank. This of course is subject to reporting restrictions.

Last month saw the conviction of Tom Hayes, a ringmaster in the manipulation of Libor. The issue in his case was whether his admitted manipulation of the rate was dishonest. The verdicts made the point that bankers are subject to the same standards of honesty as the rest of us. Alleged industry practice, arguments about “permissible range”, “no one told me not to” and “why pick on me” provide no defence in law. It was a very good result for the City, the banking sector and the market.

The Libor investigation continues and we will go wherever the evidence takes us. Currently a further 11 defendants await their trial and more charges are likely this autumn.

Of course, not every case went as we had hoped, in particular the Welsh mining case. This concerned the transfer or disposal of a very expensive obligation to restore land after mining operations. Important points about the meaning of proprietary rights and the limits of common law conspiracy to defraud will hopefully be considered by the Court of Appeal if and when raised in another case.

New investigations

We do not announce all our criminal investigations. Companies have an obligation to tell the market; but aside from this, we would not announce investigations unless there are good operational reasons for doing so, such as encouraging witnesses to come forward.

  • New investigations which have been announced include:-
  • Global Forestry Investments (investment scheme)
  • Forex (manipulation of the FX benchmark)
  • Tesco (accounting irregularities)
  • Bank of England (conduct of liquidity auctions)
  • Soma Oil and Gas (allegations of corruption in Somalia)
  • Quindell (accounting irregularities)

This time of year, stories tend to surface comparing the number of so-called “tip-offs” received by the SFO, with the small number of investigations opened. The answer is very simple: most of the “tip-offs” mentioned, whilst they may concern fraud (often resulting in dire consequences to the individual victim) they are well below SFO take-on criteria. Just because these cases do not require the deployment of the Roskill model does not mean that they should not be pursued by other agencies. We log and assess such reports, before referring correspondents to Action Fraud.

Aside from this, whistle-blowers and insiders play an increasingly important role in our work. With the significant expansion of our intelligence handling and analytical capability, the SFO is now properly equipped to handle such information. Increasingly, if we announce an investigation, we may explicitly encourage contact by such sources, and we have derived real benefit from them in current investigations.

Continuing investigations

Our very substantial investigations into Rolls Royce, Barclays Bank, GlaxoSmithKline, ENRC, GPT and G4S/Serco continue to make progress.

Why do SFO cases take long to conclude?

The sheer quantity of data is vast; obstacles, technical or legal, must be overcome. Claims of privilege may have to be tested. Witnesses and suspects must be identified. Some individuals and some companies choose to cooperate, others choose not to do so. But we get there: our 5 year investigation into the conduct of UK-based subsidiaries of the French giant Alstom has come to an end with 3 indictments against 8 defendants: 2 corporates and 6 individuals, focusing on international bribery and corruption.

The real point is this: these are exactly the sort of cases for which the SFO was designed, and the SFO will not give up and walk away or act in a way which rewards obduracy. Some corporates and their advisors need to take that on board.

Overall: currently 32 defendants, individual and corporate, are charged and awaiting trial in 8 cases.

Proceeds of Crime

The SFO’s Proceeds of Crime Division has been significantly expanded and focuses on recovering assets from serious criminals and investigating money laundering. In 2014-15, £25.7m of financial orders were obtained and £13.7m was paid.

Deferred Prosecution Agreements (DPAs)

I anticipate that at least 2 DPAs will be completed this calendar year.

Concern has been expressed by some in the NGOs and the media that DPAs will be merely a mechanism whereby companies can buy themselves out of trouble, and that prosecutors will be brow-beaten by lawyered-up corporates. These concerns are misplaced and premature.

DPA’s are intended as a mechanism whereby the collateral damage to innocent parties occasioned by the prosecution of a company can be avoided in an appropriate case. On the English and Welsh model, the prosecutor must identify the full extent of the offending. Judicial approval is required at a preliminary hearing which will take place in private and at the final application for approval which will always be in public. Crucially, the judge must be satisfied that the DPA is in the interests of justice, and is fair, reasonable and proportionate. Rubber stamps have no part in the process.

The bar is a high one. This does not mean that corporates lose their right to contest a genuine question of law or that they have to waive privilege. But cooperation is vital, and for this simple reason: how can the prosecutor convince the judge that a DPA rather than a prosecution is in the interests of justice?

I anticipate that once the offer, the bar and the process are demonstrated and understood in action, we will see many more DPA’s.

Corporate criminal liability

There is, I suggest, one more step necessary to make DPAs mainstream. That involves moving away from the identification principle of corporate criminal liability in English law and embracing something closer to vicarious liability, as in the USA.

Until that is done, a corporate might conclude that if the prosecution of a company is so difficult under our law, why should they agree to a DPA?

On a broader front, if the public interest, in terms of public confidence, demands more prosecutions of corporates, then such change is surely necessary.

Despite the advent of DPAs, prosecution is and remains the default preferred option.

The core role of the SFO

The SFO was set up by the CJA 1987 in response to concerns that the investigation and prosecution of the topmost tier of serious and complex fraud needed to be done on a new, tailor made and fully integrated model.

The need for that model is stronger today than ever before, subject to one vital proviso: the SFO has to stick unflinchingly to the sort of work for which it was designed. If it dumbs down, then it will lose its raison d’etre and justification.

It is this grasping of the nettle, embracing the most difficult and risky work, going back to the sort of case for which the SFO was designed that is, I think, the most significant change at the SFO over the past few years.

Needless to say, that level of work is extremely difficult, but that doesn’t mean it should not be tackled or be met with a purely regulatory resolution. Vitally, the offer of this kind of work has attracted superb staff who want that experience.

The SFO has 3 vital characteristics:

The Roskill model: (multi skilled teams of investigators, accountants, prosecutors, experts, counsel, each assigned to that investigation from the outset, led by a case controller) works well and there is no evidence that replacing it with some other model would deliver better results.

Priority: the SFO has top level fraud and bribery as its sole priority. If the SFO had not been created and its work was done by another, larger organisation, that single priority would become one amongst many hugely important priorities, each competing for resources and attention.

Independence: the SFO’s current caseload includes investigations into Barclays, RR, GSK, Tesco, G4S and Serco. These are household names that wield real power and influence in the city and government.

In that context it is vital that the investigator/prosecutor has visible and demonstrable independence from government: traditional operational independence may not be enough.

Those points, plus the quality of the staff we have attracted and built up, and the extraordinary strength of the SFO brand internationally, are the SFO’s vital characteristics.

An important review of Bribery Act enforcement is due to report later this year.

From the SFO perspective, top level bribery or “grand corruption” and fraud go together, and should be kept together. The SFO has a number of investigations where the suspected criminality involves both fraud and bribery; the 2 are symbiotic and require exactly the same skills to investigate.

Equally, an investigation may start off as a fraud investigation and mutate into a bribery investigation (or vice versa) as it progresses. The Sustainable AgroEnergy case is an important example of this.

There is consensus among the NGOs that top level fraud and bribery should be investigated and prosecuted in a single agency working on the Roskill model, for which they are the sole priority.

Transparency International’s Progress Report 2015, published on 20th August, places OECD members into 4 categories in terms of the rigor of their foreign anti-bribery enforcement. The top category is that of “active enforcement”. There are 4 countries in this top category: USA, Germany, Switzerland and UK. The position of the UK in this category is largely based on SFO cases.

I suggest the real issue here is not the investigation and prosecution of top level bribery, but whether sufficient resource is devoted to the lower tiers. The same applies to the middle and lower tiers of fraud.

Overall, the SFO has continued:-

  • to take on the work for which it was designed
  • to attract high quality recruits
  • to provide valuable training for its staff
  • to develop its intelligence and POC capability and
  • to build constructive relationships with its partners at home and abroad.

The SFO is well equipped, and clear and confident as to its role and mission.

Thank you for you kind attention.

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